Rising Rates Bring Cable Firms Static From Public

<i> Times Staff Writer </i>

Taking a cue from the protagonist in the anti-television movie “Network,” Santa Ana resident Joe J. T. Good Sr. wants to appear on the city’s Comcast cable access channel to declare that he’s mad as hell at rising cable fees and he’s not going to take it anymore.

Good, 73, is upset about Comcast’s decision last March to charge subscribers an extra $4.45 a month to finance the system’s public access channel and other services that Santa Ana’s previous cable owner--Group W--had provided free. Good, who says “there is no justification whatsoever for this increase,” has refused to pay the charge and wants to air his grievances on Comcast’s public access Channel 26.

“That’s his privilege,” said James W. Bequette, Western regional manager for Comcast. “But our costs have gone up; somebody has to pay for it.”

Hikes as High as 291%


Like Good, consumers across the country are finding that the cost of cable services is rising dramatically as the recently deregulated industry takes advantage of its freedom to set rates. Since a federal law freed cable television operators to raise fees starting in 1987, the national average monthly cost of basic cable service has increased 32% to $14.60.

In Los Angeles, all of the 14 cable systems regulated by the city’s Telecommunications Department have raised rates during the period, some by as much as 291%. And although at least one cable system--Choice TV in Pasadena--hasn’t raised rates in four years, the vast majority of cable operators have imposed substantial increases, much to the consternation of city cable television regulators.

“We’ve been getting a record number of complaints from subscribers,” said Warren S. Carter, cable television administrator for Torrance. “But we tell them there is nothing we can do and that they should write their congressman. The (law) has really tied our hands. . . . Congress has to do something; the cable companies are acting with complete arrogance with the public.”

Chris Derick, president of Choice Television and president of the Southern California Cable Assn., the industry’s local trade group, disputed that claim: “There has been an enormous improvement in the quality of programming,” Derick said, adding that regulation “has been terribly bad for this business and worse for the consumer” because officials kept rates so low that systems deteriorated. “Now we are getting back to an even playing field,” he said.


Under a federal law passed in 1984, cable television companies, starting in 1987, were permitted to charge their subscribers any monthly fee so long as there was “effective competition” in the community. The Federal Communications Commission has said a cable company has effective competition if at least three over-the-air television signals serve the same area.

Some 18 independent and network-affiliated broadcast stations operate in Los Angeles and Orange counties, making Southern California one of the nation’s most competitive cable markets. But unlike the deregulation of some other industries--among them, banks, the airlines and the telephone industry--the over-the-air TV competition appears to have done little to prod cable companies into providing better service or moderating prices, experts agree.

Competition Lacking

The latest report on the consumer price index, for example, showed that the nationwide cost of cable television rose 10.6% in 1988, a period when the overall index rose 4.4% nationally and 4.8% in Los Angeles. By comparison, average domestic airline fares per mile for the same 12-month period increased 6.7%, according to the Air Transport Assn. in Washington.

“The basic rationale for deregulation made some sense,” said David L. Fishman, a senior staff telecommunications consultant with the Arthur D. Little Inc. research firm in Cambridge, Mass. “It was thought that the whole video revolution would be a third force that would provide a whole lot of competition for cable. But I’m not sure that’s true now. The video store provides competition for the premium (movie channel) services like HBO and Cinemax, but they don’t provide competition for the news junkie that (watches) CNN or the sports junkie that (watches) ESPN.”

The concern over the cost of cable television has surfaced just as the industry has become a nearly essential part of home entertainment. Not only are slightly more than half of the nation’s households now subscribers, but cable is challenging the commercial networks’ video hegemony by producing original programming and increasing coverage of local sports and news.

But Cynthia Pols, general counsel for the National League of Cities in Washington, contends that programming improvements aren’t causing higher subscription fees. Rather, she says, it’s the steep prices that buyers are paying for cable systems, which have sold recently for as much as $2,700 a subscriber. That’s nearly triple the average price of $946 per subscriber in 1984, according to Sharon Armbrust, a senior analyst at Paul Kagan Associates, a media research firm in Carmel.

The high prices, Pols said, are “loading new buyers with extraordinary debt, which they then pass on to consumers.”


Still Relatively Cheap

Industry officials dispute that claim, saying that until 1987 cable fees were held artificially low by cable regulation.

“It’s important to keep in mind that, even today, the cable subscriber’s average (monthly) cable rate is $14.60,” said Lynn McReynolds, a spokeswoman for the National Cable Television Assn. in Washington. “That’s a little less than 50 cents a day, and you get 35 channels of programming for that. I spend 50 cents a day here just to buy a Coke.”

Cable subscribers could quench a lot of thirsty throats on the profits being rung up by the cable industry. Fees paid by the nation’s 47 million cable subscribers generated nearly $14 billion in gross revenue last year and $6 billion in pretax profits before interest and such expenses as depreciation, according to Armbrust. The industry’s pretax profits last year were more than double the $2.5 billion earned when deregulation began in 1984, Armbrust said.

Although some owners have plowed the money back into their operations by laying new cable and adding more channels and programming, overall cable service does not appear to have improved as fast as cable profits have increased. Complaints about picture quality, billing and blackouts are still widely heard, according to interviews with local cable regulators, consumers and industry experts.

A Century Cable television subscriber in Pacific Palisades, for example, wrote to the Los Angeles Telecommunications Department last year complaining that “we were advised of an increase in rates in September, 1988. This is ridiculous. If anything, the (Century Cable) company should issue a month’s credit to all of its Pacific Palisades customers . . . for the total lack of service.”

Many Unimpressed

William J. Rosendahl, vice president for Century Communications Corp., argued that it is impossible to provide perfect service since Century cable operates a 1,700-mile-long cable system with 150,000 subscribers from Marina del Rey to Encino. Although Century’s $18.59 basic monthly rate is higher than all but one of the 14 cable systems regulated by Los Angeles, Rosendahl said his company’s recent rate hike is “not out of line with other systems” and is helping to finance an overhaul of the aging Century system.


Yet some other viewers are unimpressed with the addition of new channels that often duplicate existing choices rather than provide innovative programming. They feel that cable television is no longer worthwhile.

Patrice Johnston, a hospital administrative assistant who lives in Torrance, canceled her cable service last year after the company imposed two increases in 16 months.

“They were telling me that for the service and number of channels they were offering you couldn’t beat the price, but I felt the increase was a bit exorbitant compared to other things I was buying,” Johnston, 33, explained. “Basically, I felt that cable was something I could live without.”

Chris Derick of Choice Television argues that if more cable operators would improve service to consumers, complaints about rates would subside.

“I think the cable industry has a lot to do to improve the quality of service . . . but you have to put it in context,” said Derick. “If I put on ‘Rocky’ and I lose the last minute, people are going to remember that and be mad as hell. But if your telephone goes out for a while, you probably don’t complain.”

Study Launched

Nevertheless, enough complaints have been raised to prompt Congress to ask its investigatory arm, the General Accounting Office, to conduct a comprehensive survey of cable television fees to determine the effects of deregulation. The GAO expects to report its findings to Congress next fall.

But some legislators are already itching for change.

“As for those rates, much of the blame for this situation rests right here--with the Congress,” Sen. Howard M. Metzenbaum (D-Ohio) told a January meeting in Washington of the National Assn. of Broadcasters. Metzenbaum, who has promised to introduce legislation that will increase competition in the cable industry, said by deregulating the cable industry Congress “took the lock off the chicken coop, and the FCC practically invited the foxes in.”